Southwest Airlines says Delta variant is hurting business

Southwest Airlines Co. LUV 1.43% said the recent surge in Covid-19 cases was slowing bookings and increasing cancellations, showing how fast the Delta variant undermines economic activity.

The airline said on Wednesday that if demand for the key Labor Day weekend remained healthy, the recent slowdown would make it difficult to earn third-quarter profits, excluding the impact of government wage assistance. This is even after a fare sale designed to fuel the return of business traffic in the fall.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Southwest’s move reverses the bullish tone of airline executives just weeks ago, with the rise in Delta variant infections causing the cancellation of festivals and commercial events like the New York Auto Show scheduled for later this month.

Some consumers reconsider activities such as travel and eat out as the push brings some retailers and municipalities to reimpose mask mandates.

The weekly average number of seated diners tracked on the restaurant booking platform OpenTable was down 8% from 2019 levels for the week ending August 10, a reversal from the end of June, when the Dining activity has surpassed 2019 levels. Credit card spending tracked by Chase shows airline travel purchases have fallen in recent weeks as restaurant spending has leveled off, analysts at JP Morgan said. in a note Tuesday.

Airline fares edged down in July, according to the Labor Ministry, reversing the sharp rise in recent months as demand for air travel picked up.

THREE MAJOR AIRLINES INDICATE THAT THEY WILL NOT FORCE EMPLOYEES TO VACCINATE

Slowing travel demand after a period of rapid growth adds to the challenges airlines face. These include shortages of personnel and aircraft spare parts which airlines say, along with bad weather, have caused cancellations and delays.

Southwest said in a regulatory filing on Wednesday that the recent slowdown meant it now expects operating revenue for the month to be 15-20% lower than 2019 levels. That compares to an earlier estimate. for a drop of 12% to 17%. Southwest said September revenue could drop by a quarter from 2019.

The parent of Frontier airlines said last week that he had started to see an impact from the Delta variant. Mesa Air Group Inc. –– one of the largest regional carriers–– said Monday it was concerned about the effect on falling demand, which relies more than summer on business traffic.

Leaders in the Southwest last week said they expected commercial traffic in September to be down 50% from pre-pandemic levels, down from a 69% drop in June.

JETBLUE LAUNCHES FIRST FLIGHT FROM LONDON DESPITE LONG PANDEMIC

Airlines have declared office and reopening of schools in the fall could increase business travel. However, the latest developments in Covid-19 have created uncertainty over whether workers will return to the office as planned. Leading companies such as Apple Inc. and Alphabet Google Inc. has decided to postpone call back employees.

“The biggest risk in the fall comes as the Delta variant continues to restrict access to offices, pushing a significant return of business travel further to the right,” said Sheila Kahyaoglu, Jefferies Group analyst. LLC, in a customer note.

Some carriers have responded to the increase in Covid-19 cases with employee vaccination initiatives.

United Airlines Holdings Inc. last week became the first propose to make staff vaccination compulsory, and Hawaiian Holdings Inc. said on Monday it would follow suit. Frontier Group Holdings Inc. said workers should be vaccinated or undergo regular testing. United’s regional airline and international alliance partners have not said they will make vaccinations mandatory.

Other U.S. airlines have continued to encourage vaccines to increase vaccination rates for the workforce which they say are higher than for the general population.

CLICK HERE TO LEARN MORE ABOUT FOX BUSINESS

United chief executive Scott Kirby is due to appear later Wednesday at a virtual White House summit to promote vaccinations.

—Gwynn Guilford and Colin Kellaher contributed to this article.

Write to Doug Cameron at [email protected]